For many consumers, the biggest contributor to their environmental footprint may not be their daily commutes or flights across the country, it’s their wardrobe.

In fact, the garment industry uses enough fresh water to quench the thirst of 5 million people a year, produces 20% of the world’s wastewater, and has a carbon intensity that exceeds aviation and shipping combined. It is also a major contributor to microplastic soil and water pollution.

The social impact of fashion is not lost on consumers, especially young shoppers who represent a key demographic. Many are consciously buying fewer new clothes and embracing thrift stores as a more sustainable alternative. At the same time, investors focused on environmental, social and governance (ESG) factors are also taking a closer look at the impact of the industry and, whether through engagement or exclusion, further incentivize manufacturers. apparel companies to rethink how they manufacture, market and dispose of their wares.

This places the fashion industry in a difficult situation: how to remain relevant to consumers who demand the latest styles while reducing the environmental and social impacts of the life cycle of clothing. “It’s not an easy problem to solve,” says Jessica Alsford, director of sustainability at Morgan Stanley.

Again, the apparel industry is no stranger to reinvention, and it is now applying that same ingenuity to a wide range of ESG innovations and initiatives. Here are five sustainable fashion trends tracked by analysts at Morgan Stanley Research.

Materials are the biggest contributor to the fashion industry‘s environmental footprint. Between 60% and 70% of all clothing is made from petroleum-based synthetic fabrics. When washed, these fabrics release microplastics that enter the soil, rivers and the ocean, where synthetic textiles account for more than a third of all microplastics.

To solve the problem, fashion brands and materials science companies are considering using alternative materials, such as biodegradable polyester, and on a large scale and even making products, such as eyewear, from carbon. captured instead of plastic.

Leather is another big area of ​​interest, especially for luxury apparel companies, which account for 30-50% of the $100 billion market for animal skins. “Companies are researching and developing leather-like products grown in the lab, or made from apple skins or mycelium, which is the vegetative part of a fungus, and actually offsets carbon as part of its process of growth,” says Lucy Beauvallet, equity strategist. in the Global Sustainability Research Team.

Sustainable materials are a big part of the solution, but so are circular business models, which allow companies to refurbish and resell their own products. Many large retailers are encouraging customers to drop off or send in their old clothes and are investing in their own second-hand sales channels. Even luxury brands are increasingly finding value in refurbishing and reselling select pieces.

Integrating circular business models at scale is not without its challenges. “Retailers need to coordinate resale ‘reverse logistics’, as well as manage transportation costs and operations for used items,” says Lauren Schenk, who covers small- and mid-cap internet stocks, including those clothing oriented. She and her colleagues estimate that the U.S. apparel and accessories resale market could grow more than 14% annually over the next four years, making it one of the fastest growing U.S. apparel sub-segments. fastest growing.

Although reselling or refurbishing clothing is often the most sustainable option, it is often not feasible. This is where recycling becomes an essential part of the sustainable playbook. In fact, about 80% of all fibers end up in landfill.

Many of the biggest apparel companies, including some of the companies that popularized “fast fashion”, have pledged to provide 100% recycled or sustainably sourced materials over the next decade.

It’s an ambitious goal, of course.

“Recycling is still a very mechanical process, especially for cotton, and few technological advances have been made in recent history,” says Elena Mariani, a European equity analyst covering apparel and luxury brands. “For major retailers to meet their ambitious recycling targets, the industry will need to find new ways to make recycling efficient and cost-effective.”

At first glance, the concept of brands designing and selling clothing exclusively for the metaverse — a virtual world that incorporates augmented and virtual reality — seems like a novelty with no positive results in the real world. However, digital-first technologies, such as digital rendering services, allow companies to design, present and revise collections in a compelling and realistic way, thereby reducing the environmental footprint of the design and marketing phases of the production of clothes.

Digital renderings could also significantly reduce the waste associated with product returns that don’t fit properly or are misrepresented on screen. “Theoretically, customers will be able to dress up their digital twins before purchasing, in which case they’ll be less likely to return products that don’t fit or look like they expected,” Schenk says.

Alternative materials, circular business models, efficient recycling and digital design can go a long way in making the garments produced by the fashion industry more sustainable.

Yet, as is the case with most industries, making meaningful change will also require looking at the operational side of the apparel industry, thinking about everything from energy consumption and hiring practices. marketing and governance.

“Many large retailers believe that sustainability should be embedded into core operations and corporate culture of the company, rather than being confined to single product lines,” says Alsford.